http://knowledge.wharton.upenn.edu/ Knowledge@Wharton is an online resource that offers the latest business insights, information, and research from a variety of sources. Content includes analysis of current business trends, interviews with industry leaders and faculty, articles based on the most recent business research, book reviews, conference and seminar reports, and links to other websites. en-us Copyright (c) 2007 The Wharton School of the University of Pennsylvania Wed, 22 Aug 2007 00:00:00 EST Wed, 22 Aug 2007 13:39:39 EST http://www.wharton.upenn.edu/globals/images/katw_white.gif http://Knowledge.wharton.upenn.edu 125 45 Knowledge@Wharton Research Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1797 After weeks of skittishness and fear, investors showed signs Tuesday of settling down. &quot;Yesterday was one of the dullest days in the market that we've had in a while, and that's good in many ways,&quot; says Wharton finance professor Jeremy Siegel. Investors have been reeling from widespread problems in the subprime sector, stocks have fallen, yields on Treasury securities have dropped and some companies are finding it hard to borrow money -- all of which spurred the Federal Reserve last week to announce a cut in interest rates. Meanwhile, the upheaval has shown that quant funds, despite their computer power, aren't immune to mistakes and market downturns. So what can we expect in the weeks ahead? Wed, 22 Aug 2007 13:35:36 EST Law and Public Policy http://knowledge.wharton.upenn.edu/article.cfm?articleid=1796 Mattel's recall of more than 10 million toys in the U.S. over the past three weeks has done more than focus attention on the company's wide array of products, which include such household names as Elmo, Ernie, Big Bird, Barbie and Batman. It has also further raised public awareness of quality control problems in China and the relentless push to cut costs along every step of the supply chain. Knowledge@Wharton looks at Mattel's response to the crisis, its potential liability and the consequences for China. Wed, 22 Aug 2007 13:17:32 EST Managing Technology http://knowledge.wharton.upenn.edu/article.cfm?articleid=1795 It's open season on Microsoft Office. Google is distributing Sun Microsystems' StarOffice and also has its own web-based productivity suite. Apple has a new spreadsheet called Numbers to compete with Microsoft's Excel. Open source suite OpenOffice, along with several web-based products, are attacking as well. All these challengers emerge at a time when Microsoft's dominance in productivity software -- Microsoft Word, PowerPoint and Excel -- remains strong. So why try to overthrow the leader? And how vulnerable is Microsoft to this assault? Wed, 22 Aug 2007 13:17:32 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1794 The long-term performance of a company's stock may be the ultimate test of a CEO's talents. But that's not the only measurement used by boards of directors to gauge how well the boss is doing. Experts at Wharton and elsewhere say that companies use many different metrics -- all of which can be fine-tuned to fit a company's circumstances. Wed, 22 Aug 2007 13:17:32 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1793 For those entrepreneurs who want to run a company but prefer to skip the start-up stage, search funds offer a possible alternative. A specialized form of private equity first launched in the mid-1980s, search funds are becoming increasingly popular -- and their supporters claim they can offer investors attractive returns and business owners a compelling exit strategy. What does this trend in private equity mean for investors, and for small businesses that might be acquisition targets for these funds? Robert Befidi, Jr., and Mark Sinatra, managing directors of Gordian Capital in New York City, spoke to Knowledge@Wharton about the pros and cons of search funds. Wed, 22 Aug 2007 13:35:31 EST Leadership and Change http://knowledge.wharton.upenn.edu/article.cfm?articleid=1792 Several years ago, while visiting a regional branch of Lee Hecht Harrison, a global career management services company, then-president Stephen Harrison was stopped short by &quot;Ray,&quot; his COO. &quot;You didn't greet the receptionist,&quot; said Ray, who went on to explain that &quot;a receptionist is a corporate concierge. They will talk to more important people in a day -- suppliers, customers, even CEOs -- than you will talk to all year.&quot; Harrison, speaking at the recent 11th annual Wharton Leadership Conference, contends that small acts like this are part of what makes for an ethical corporate culture. He was joined at the conference by public speaking coach Richard Greene, author of <em>Words that Shook the World: 100 Years of Unforgettable Speeches and Events.</em> Wed, 22 Aug 2007 13:17:32 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1791 Over the past two decades, sushi -- a familiar, accessible and immensely desirable food that can be found in supermarket aisles and fast food outlets as well as high-end restaurants -- has become a staple of cultures around the globe. Indeed, far from signaling the snobbery of those who eat it, sushi today belongs to the masses. Yet sushi also says something important about how wealth, taste and markets interact, according to Sasha Issenberg. In his new book, <em>The Sushi Economy:</em> <em>Globalization and the Making of a Modern Delicacy,</em> Issenberg argues that sushi reveals the &quot;complex dynamics of globalization&quot; and shows, against all odds, that &quot;a virtuous global commerce and food culture can exist.&quot; Wed, 22 Aug 2007 13:17:32 EST Marketing http://knowledge.wharton.upenn.edu/article.cfm?articleid=1790 Wharton marketing professor Leonard Lodish admits he is somewhat to blame for the erosion in brand pricing power that has hit many consumer-goods companies -- but not entirely to blame. In 1993, as store-level scanning data started to become widely available, Lodish coauthored an article outlining its power to gauge the effect of price promotions on revenue. But he also warned that these tools were not the only determinant of brand power. Now, in a new paper, Lodish and co-author Carl F. Mela show how widespread adoption of easy-to-harness, short-term measures has altered consumer behavior and made it harder for brand managers to compete. Wed, 22 Aug 2007 13:17:32 EST Law and Public Policy http://knowledge.wharton.upenn.edu/article.cfm?articleid=1789 In June, a high-profile Supreme Court case held the attention of retailers and manufacturers alike. In a five-to-four ruling, the high court overturned a lower-court decision to award $1.2 million to a Dallas-area clothing store that was cut off by a supplier, Leegin Creative Leather Products, because the retailer refused to abide by the manufacturer's retail price maintenance (RPM), or no-discount policy. The decision means that manufacturers no longer face a blanket prohibition against implementing an RPM policy. The case has spurred concern among consumer groups, who claim it overturns a century of precedent and will lead to price fixing and unjustifiably higher prices. But Wharton faculty suggest that any changes will be gradual, and may ultimately benefit consumers. Wed, 08 Aug 2007 15:43:21 EST Law and Public Policy http://knowledge.wharton.upenn.edu/article.cfm?articleid=1788 On August 1, Mattel recalled approximately 1.5 million toys made by a manufacturer in China because of dangerous levels of lead in their paint. Four days earlier, the Chinese government ordered the country's banks to increase their reserves as part of an effort to cool down its red-hot economy. But quality concerns and rapid growth aren't China's only worries. There is also the government's need to keep forging ahead on preparations for the Olympics next August in Beijing, despite criticism about overdevelopment and unsafe levels of pollution. Knowledge@Wharton asked management professor Marshall Meyer for his perspective on these issues. Wed, 08 Aug 2007 16:08:27 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1787 Fast-growing social networking site Facebook and mobile messaging service Twitter didn't introduce break-through technologies, but they have become phenomenal success stories nonetheless. Increasingly, &quot;web 2.0&quot; companies like these are altering the traditional venture capital formula, which used to count technology differentiation as a key requirement when evaluating new targets. In many cases, technology has become a commodity, but a big idea can go a long way provided there's a rapidly growing audience. As VC firms look for new investments, several questions come into play: How should companies be evaluated when they rely on technology that is easily replicated? How much value does a big audience carry? What is the preferred exit strategy? Wharton faculty and&nbsp;VC experts weigh in on these and other questions. Wed, 08 Aug 2007 15:43:21 EST Managing Technology http://knowledge.wharton.upenn.edu/article.cfm?articleid=1786 Prediction markets, where people bet on everything from the likelihood that a movie will be a hit to the chance that a politician will become president to whether the stock market will go up or down, are in vogue. But because prediction markets have to be managed, they aren't always the ideal way to get information. Wharton professors Albert Saiz and Uri Simonsohn have found a cheaper way to deliver some of the same benefits. It's called an Internet search. The two professors argue in a new paper that the likelihood that a topic is discussed online, in relation to a given location, correlates with its relative prevalence in the real world. Wed, 08 Aug 2007 15:43:21 EST Human Resources http://knowledge.wharton.upenn.edu/article.cfm?articleid=1785 This spring, World Bank president Paul Wolfowitz was forced out after being accused of arranging a big raise and promotion for a woman with whom he was having a relationship. As anyone who works in an office knows, though, favoritism isn't confined to love and sex: Family relationships and close friendships can upset co-workers' sense of fairness, too, and end up undermining an organization's performance. What's the solution? There's no one answer, according to Wharton faculty and other experts, but companies would be well-advised to keep their rewards systems transparent and to have clear policies regarding conflicts of interest. Wed, 08 Aug 2007 15:43:21 EST Leadership and Change http://knowledge.wharton.upenn.edu/article.cfm?articleid=1784 The secret to long-term CEO success, according to David Nadler, is conceiving of a CEO's tenure as a performance with a series of distinct acts. "Each act requires the CEO to lead, think and behave in fundamentally different ways. The successful ones are those who are able to make the transitions," says Nadler, a consultant to boards and senior executives, who spoke during the recent 11<SUP>th</SUP> annual Wharton Leadership Conference. The theme of the conference, sponsored by the Center for Leadership and Change Management, the Center for Human Resources and Wharton Executive Education, was "Developing Leadership Talent." Wed, 08 Aug 2007 15:43:21 EST Managing Technology http://knowledge.wharton.upenn.edu/article.cfm?articleid=1783 Producing a feature-length motion picture is a daunting task, especially if you do it without the support of a major studio using money you have raised yourself. But according to independent filmmaker Lance Weiler, &quot;the real struggle&quot; comes after the film is completed. Distributing a theatrical feature -- and doing so profitably -- poses an even greater challenge. As Weiler noted during a recent interview with Knowledge@Wharton, &quot;making the film is easy in comparison.&quot; Yet Weiler believes he has a solution. By expanding the movie into an interactive theatrical event, Weiler has carved out a niche that he believes offers an economically viable model for independent cinema. Wed, 08 Aug 2007 15:43:21 EST Finance and Investment http://knowledge.wharton.upenn.edu/article.cfm?articleid=1782 U.S. stock markets are in a tizzy. The Dow Jones Industrial Average plunged 311 points on July 26, and most media companies interpreted this to mean the end of the buyout boom. Buyout firms such as the Fortress Investment Group and the Blackstone Group were hit especially hard. How long will the turmoil continue? Could the trouble spread overseas to international markets? What is the right strategy for investors in these times? In an update to the podcast that Knowledge@Wharton published on July 25, Wharton finance professor Jeremy Siegel offers his insights on these questions. In the earlier podcast, he discussed the continuing crisis involving sub-prime housing loans and other issues -- including economic growth in China and the impact of the strong Indian rupee -- with Knowledge@Wharton. Wed, 25 Jul 2007 15:32:16 EST Law and Public Policy http://knowledge.wharton.upenn.edu/article.cfm?articleid=1781 Following accounting and governance scandals at Enron and other U.S. companies, policymakers in the United States and elsewhere responded by establishing new corporate governance rules, including the Sarbanes-Oxley Act. Now, after complaints from the business community that regulations are hurting profits, some countries are taking a second look at post-Enron reforms. But according to research presented during a recent conference on international corporate governance -- sponsored by the Weiss Center for International Financial Research at Wharton -- countries should think twice about loosening governance regulations. Wed, 25 Jul 2007 14:40:29 EST Strategic Management http://knowledge.wharton.upenn.edu/article.cfm?articleid=1780 Wharton professor Serguei Netessine, who recently had to spend the night in an airport hotel after being kicked off an overbooked evening flight, is one of thousands of airline passengers this summer who have been stranded on runways or sleeping in airports. While airline service is no longer the white-glove experience it once was, it has recently gone beyond bad food and snappish flight attendants. "Previously, airlines worried about dissatisfied customers. Now I don't think they worry about it because the customer service at all airlines is so horrible," says Netessine. Knowledge@Wharton looks at the current state of the airline industry. Wed, 25 Jul 2007 14:40:29 EST Leadership and Change http://knowledge.wharton.upenn.edu/article.cfm?articleid=1779 For big-screen movie company IMAX, the past several weeks must have seemed like the best of times and the worst of times. The recent opening of <EM>Harry Potter and the Order of the Phoenix</EM> was the largest and most successful in IMAX history. Yet despite the record box office, the company's stock price remained moribund as it delayed its financial filings to restate its revenue recognition for the years 2002-2005 and responded to an informal inquiry from the SEC. This was not the first challenge faced by Richard Gelfond and Bradley Wechsler, who share the titles of chairman and CEO. Knowledge@Wharton recently spoke with Gelfond at IMAX's corporate headquarters in New York about the company's plans for the future. Wed, 25 Jul 2007 14:40:29 EST Marketing http://knowledge.wharton.upenn.edu/article.cfm?articleid=1778 Just a decade ago, a company called Baby Einstein helped launch a new line of educational videos and toys that many parents believed would put their toddlers in the fast lane to success. The company was soon joined by others that promoted educational and entertainment products for babies and the under-three-year-old set, including The Baby Prodigy Company and Brainy Baby. But recently some child advocacy groups -- and the author of a new book -- are warning parents to rethink the products and the messages behind these campaigns. Wed, 25 Jul 2007 14:40:29 EST